The Netherlands Development Finance Company (FMO) has opened a USD 5 million credit line to the Belarusian Bank for Small Business (BBSB) to primarily help develop the bank’s micro-lending program for small and medium-sized business. The loan is also expected to help in the acquisition of necessary instruments for the bank’s infrastructure development [1]. According to a news report published in the Belarusian news and information agency BelTA, the agreement to open a credit line was signed in Minsk and the line is open for five years with a two year delay in payment. No further information on the credit facility is currently available.
BBSB is reportedly the first bank dedicated to serving the needs of micro and small businesses in Belarus. It formally received its banking license in August of 2008 and was founded by the FMO, The European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC), Kreditanstalt fur Wiederaufbau Banking Group (KfW), Swedfund (a Swedish risk capital company), Commerzbank in Germany and Shorebank/ Shorecap. The press release of BBSB’s officially opening on Oct 6, 2008 was also covered by Microcapital [2]. BBSB’s main goal is to develop a program of micro-lending for small and medium-sized businesses and the acquisition of necessary instruments for the bank’s infrastructure development. Services offered include loans in Belarusian rubles, US dollars and euro; deposits, bank accounts, cash management services and operations with foreign currency. The bank has so far opened two offices in Minsk, which reportedly houses over 50 percent of the country’s small businesses [3]. It also has one office in the Grodno region of Belarus with plans to open three more this year [1].
Since its opening in October 2008, the BBSB has reportedly issued loans to more than 580 small businesses totaling about USD 6.6 million. According to the release, the bank’s lending to the private sector of the Belarusian economy has also been on the rise [1]. A December 2008 press release on the EBRD website states that BBSB loans are offered ‘on a purely commercial basis which will range from as little as USD 270 to USD 270,000 but would be concentrated on the lower end of the market where there is a strong need for loans of below USD14,000’ [7]. Per currently available information, the maturity of these loans would ‘mainly be up to one year’ [7]. In December of 2008, BBSB had also received a five-year loan commitment of USD 5 million from EBRD [1] to help kick-start the bank’s micro and small business financing activities and to reach out to micro entrepreneurs and small businesses, especially in the regions outside of Minsk. Founded in 1991 and headquartered in London, the EBRD has dedicated USD 1 billion to microfinance since 2007 through debt, equity facilities, and technical assistance [9]. It is estimated that the EBRD has provided more than EUR 14.8 billion (estimated USD 20.6 billion) through its small business lending programs to support micro, small and medium-sized enterprises [10].
Currently, there are 215,000 micro and small businesses (MSEs) estimated to be active in Belarus [4] and the EBRD estimates the total demand for small business lending in Belarus to be USD 1.4 billion [5]. However, only 15 percent of Belarus’ demand for microfinance is being met now, according to a publication on the Belarusian Economy magazine titled ‘Microfinance in Belarus’ [6]. Although some prerequisites for microfinance (including mechanisms for individual and group micro-lending and legal framework for regulation) have been set up in the Republic of Belarus, several problems still plague the Belarus microfinance sector. Challenges include the fact that the banking sector which mainly provides microcredit in Belarus has a very limited representation in rural areas and credit cooperation in the form of financial consumer institutions is underdeveloped [6]. Additionally, according to the publication, the country also lacks support infrastructure in terms of rating agencies, specialized bookkeeping or audit services and educational centers that could improve microfinance quality. Low financial, legal and economic awareness of the public, especially in rural areas are also indicated as factors posing challenges to the country’s microfinance sector [6].
The Netherlands Development Finance Company (FMO), one of the founding organizations of the BBSB, is a public-private development bank established in 1970 by the Dutch government. It has both the Dutch State and large Dutch banks as its major shareholders, with the Netherlands government holds a controlling stake of 51 percent in the bank [1]. As of 2008, the FMO had total assets of EUR 3.6 billion and a loan portfolio of EUR 1.7 billion [11]. In 2007, USD 287 million was allocated to microfinance investments [8].
By Bharathi Ram, Research Assistant
Bibliography:
[1] Belarus Telegraph Agency, ‘FMO opens USD 5 million credit line to BBSB’, http://www.belta.by/en/news/econom?id=404311
[2] MicroCapital Story, ‘FMO supports first Belarusian Bank for Micro and Small Businesses’, https://www.microcapital.org/press-release-fmo-supports-first-belarusian-bank-for-micro-and-small-businesses/
[3] EBRD, ‘Country Profile: Belarus’, http://www.ebrd.com/pubs/factsh/country/belarus.pdf
[4] EBRD Press Release, June 2009, ‘EBRD lends USD 10 million to Minsk Transit Bank’, http://www.ebrd.com/new/pressrel/2009/090623.htm
[5] EBRD, http://www.ebrd.com/pubs/factsh/country/belarus.pdf
[6] Belarusian Economy, ‘Microfinance in Belarus’, http://74.125.47.132/search?q=cache:2ezMWMD82I8J:econ.belta.by/econom_eng.nsf/all/5C6EB3310C097B494225748200496585/%24File/58-65.pdf+belarus+microfinance&cd=3&hl=en&ct=clnk&gl=us
[7] EBRD Press Release, ‘First EBRD loan for BBSB’, http://www.ebrd.com/new/pressrel/2008/081217b.htm
[8] MIX Market, ‘FMO’, http://www.mixmarket.org/funders/fmo/structure
[9] Microcapital Story, ‘EBRD invests over USD 1 billion in Microfinance Initiatives since 2007’, https://www.microcapital.org/microcapital-story-european-development-finance-institutions-part-1-european-bank-for-reconstruction-and-development-ebrd-invests-over-usd-1-billion-in-microfinance-initiatives-since-2007/
[10] EBRD, Fact Sheet, http://www.ebrd.com/pubs/factsh/themes/sme.pdf
[11] FMO, Annual Report 2008, http://www.fmo.nl/FMO/documents/AR/FMOAR08.pdf
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